Why are we so keen to become a cashless society?

Yesterday, I wanted to start the week off well, so I splurged a bit and took a taxi to the office. I booked my Grab, hopped-in the ride and checked emails for the duration of the trip. At the office, the driver confirmed that I was indeed using GrabPay and let me off.

It was pretty baller.

Today, I wanted to eat slightly healthy for cheap and went to the local hawker center downstairs and ordered Kimchi soup. I pulled five dollars out of my pocket, thanked the nice lady who makes the food and went upstairs to eat with my colleagues.

It was also pretty baller.

This little anecdote is meant to highlight that in the day-to-day, the lifestyle difference between a cashless vs. cash-only society is fairly minimal — and yet, if we take Prime Minister Lee Hsien Loong’s National Day Rally Speech at face value, Singapore is about to make a major push to become a cashless society.

The impetus for the renewed focus is the continuation of Singapore’s Smart Nation drive, and PM Lee pointed directly at mobile payments as a place where the Lion City lags behind other nations. The obvious example is China, and the reality that in Chinese Tier-1 cities, cash is almost obsolete thanks to the growth of WeChat and Alipay.

It is undeniable that the entire world, including the United States, lags behind China when it comes to mobile payments.

“So when visitors from China find that they have to use cash here, they ask: ‘How can Singapore be so backward?’” he said in the speech.

To which I ask: Who cares?

Singapore is far ahead of China in some metrics (per capita GDP being the most glaring and, frankly, important). In other measurements, China outpaces Singapore.

Pushing for mobile payments simply because it works in China is not only pointless, I would argue that it is a misguided allocation of resources that more directly benefits the wealthy in society and actively harms the poor.

Big data and big banks

For the sake of this argument, let’s use Singapore’s most iconic cultural feature — its hawker centres — as an example. Not only is the hawker-centre-dilemna transferable to individuals and other SMEs, the industry is still very cash-heavy. Going to a hawker center without cash in the pocket is an extremely risky proposition.

This week, the Smart Nation and Digital Government Office said it plans to push out a mobile payments infrastructure to the city’s hawker centres in phases over the coming yearss. In terms of aesthetics, I don’t care. I am no ‘get off my lawn’ writer who thinks that hawker centres should maintain cash-based transactions because “that’s how it has always been”.

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No, this is about data, and banks; who will suddenly have a huge amount of information about our purchasing history, trends and risk factors. In the cases of hawker centres, this directly impacts whether or not a small business owner can get a loan.

With the pervasiveness of technology, banks already know a lot about us as consumers, but if we want to maintain a bit of privacy, we do have an option. We can still go to an ATM and pull out cash. Once the cash is in our hand, it’s impossible for a bank to see how it gets spent.

Maybe you bought a TV you shouldn’t have, or, maybe you re-invested it in a retirement fund. The latter is probably something that would make it more likely to get a loan, but nobody wants a society where splurging on a television harms your ability to expand Hawker center business six months later.

In a cashless society, banks see everything that comes in and everything that go out. They will, and do, issue loans based on this information — which we know by the catch-all phrase Big Data. Algorithms are already incredibly important for making lending decisions, a trend that should only increase over the coming years.

But isn’t this a good thing? Won’t algorithms help banks make smarter lending decisions?

Not necessarily, as Cathy O’neil explains in Weapons of Math Destruction, algorithms are built by people, are prone to mistakes, and are particularly vulnerable to becoming a self-fulfilling prophecy.

Imagine, my fantastic kimchi-soup cook needs a new stove, but she cannot get a loan because the data the bank algorithms (based on real mobile payments from real people) says Korean hawker centres do poorly compared to their peers. This kimchi soup maker then goes out of business because the restaurant needed the US$10,000 to get the kitchen up to cook the food.

Th fact that the restaurant died would prove the algorithm correct, kimchi soup just does not sell well enough in Singapore to justify a loan. But, did the restaurant fail because Singaporeans don’t like Korean food? Or did it fail because it never got a chance to get off the runway?

As a society becomes more cashless, decisions that make a huge impact on the lives of individuals will be made based on data points and algorithms that, in five years, may look antiquated and wrong. It’s frankly, a scary thought.

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Now I am not saying we all blow up our phones and return to the stone age, but a widespread effort to kill cash because “China is ahead” creates other problems that are not getting discussed in Singapore’s Smart Nation drive.

Which brings up my next point.

Building an infrastructure for those who can afford it

My Grab ride was certainly baller, but I can afford an iPhone, my data plan and credit card payments. A lot of people can not, and rely heavily on their debit account and count pennies when they purchase food, clothes and pay for rent.

For example, my neighbourhood is considered to be a fairly poor area of Singapore and it attracts a significant portion of the city’s immigrants from across Asia. Every month, the queue in front of the ATMs explodes as people, some of whom chat or type away on their brick phones, pay their monthly bills via ATM transfers.

I know this because I used to be one of these people. I used to withdraw my rent payment, in cash, from my bank account, commute across the city with way-too-much money in my pocket and deposit it in the nearest POSB ATM to pay my share of the rent. I would stand in line with dozens of people (at just one ATM) who were doing the exact same thing.

Why did I have to do this? Because the system wasn’t designed for people who wanted to manage their money outside of the DBS/POSB/OCBC bubble. Now, it seems, Singapore wants to grow this bubble.

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For the average person within this bubble, they will see minimal to zero negative changes in their life and I am sure they will enjoy the convenience of not having to worry about cash. But for the construction worker, maid, hawker center cleaner or MRT janitor, an infrastructure that is not designed for their income level will result in an increasingly burdensome lifestyle.

The reason ‘cash is king’ is because — until recently — it was used by everyone. Building an entire economic infrastructure around our phones will certainly make cash more of a Jack (Poker anyone?), but it will result in a haves vs. have nots payments system.

Fixing other problems

Like all countries, Singapore has its problems that can certainly be fixed through technology. The Prime Minister’s focus on diabetes was criticised, but not by me. I think while it is not a sexy, PM Lee pinpointed, and brought to the public, one of the city’s largest problems.

Singapore has one of the world’s highest rates of diabetes, and a Smart Nation is primed to help people manage, or cure, their disease.

The city-state is also incredibly inefficient in regards to the environment. Singapore’s ecological footprint per capita is the highest in Asia, and eighth worst globally. Again, a problem that seems perfectly primed to be fixed by a Smart Nation.

The point is, shifting from cash to phones for payments is a moderate change in the lives of many people (and as outlined above, actively harms others) and not worth being the key push for Singapore’s technological drive.

Let’s work on factors that truly make a difference — improving education, protecting the environment, helping the poor or improving medicine.

Paying for kimchi with your phone should not be a top national priority.

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